International Tax Compliance: What Are Your Options?

To help delinquent taxpayers become compliant and avoid harsh statutory penalties, the IRS has issued extensive guidance and programs available. The primary options for managing disclosure are outlined below:


The Offshore Voluntary Disclosure Program

The IRS Voluntary Disclosure Program allows taxpayers to provide the Internal Revenue Service with information about previously unreported offshore income, accounts, investments, and assets, thereby resolving their foreign and U.S. tax issues. 

This program requires you to make a complete, truthful, and timely disclosure through approved procedures. In addition, you must cooperate with the government in determining your actual tax liability and make good faith arrangements to pay. To be ‘timely,’ you must reach out to the IRS before it has acquired information about your noncompliance or commenced a criminal investigation or civil examination.

Streamlined Domestic and Foreign Offshore Procedures

Streamlined procedures are only available to those who can demonstrate reasonable cause for not filing Foreign Bank and Financial Accounts (FBARs) and delinquent information reports on time. The procedure requires amending the past three years of returns and preparing the past six years of FBARs. 

  • You may only use the domestic procedure if you have already filed three years’ worth of returns. The highest year-end balance of non-compliant offshore accounts is subject to a 5% penalty.
  • A taxpayer may only use the offshore procedure if they have lived abroad for at least 330 days in one of the past three years. Unlike the domestic procedure, it does not carry any penalties.

Quiet Disclosure

In quiet disclosures, original or amended tax returns are filed without going through a voluntary or streamlined disclosure program. With this strategy, the taxpayer does not alert the IRS of any past mistakes. Instead, they merely correct their taxes. Quiet disclosure also occurs when a taxpayer allows their past mistakes to go uncorrected and then files their returns correctly from the current tax period onwards.

If you have foreign accounts with unreported income, you might want to consult a tax attorney because doing nothing is riskier than entering into the streamlined program or the voluntary disclosure program.

Delinquent Submission Procedures

This process is intended for taxpayers who have failed to file an international informational report with the IRS confirming ownership interest in an offshore account but have no unreported income for the year. Penalties can be avoided if the taxpayer has reasonable cause.

Speak With a Miami Tax Attorney Today

At Weisberg Kainen Mark, PL, we can help you achieve compliance before the IRS finds you in violation of international rules/regulations. All of the options outlined here have many nuances and are highly specific to your facts and circumstances, so we need to do a lengthy analysis before we make any recommendations.  However, all options are better than the alternative – either an IRS examination/audit or an IRS criminal investigation. To schedule a consultation with a Miami tax lawyer at our firm, please call 305-374-5544 or complete our online form.

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